By going with the flow, Kellogg professors have transformed operations management

By Rebecca Lindell

Talk about improving efficiency.

Every few months, the Kellogg School operations and supply chain management faculty would resume the tedious process of assembling their class notes. Each professor would copy, print and collate hundreds of pages, then distribute the packets to their classes.

It soon became obvious that there was a better way. "Let's just have this custom-published so we don't have to re-do this each quarter," Professor Jan Van Mieghem suggested. They did, and the volume that arose from this material was soon snapped up by publisher Prentice Hall.

The first edition of the textbook, Managing Business Process Flows, was published in 1999. A second edition followed in 2005, and a third is in the works. The text is not only used in many top business schools, it has defined a new framework for studying supply chain management. That's by design.

Professor Sunil Chopra says that when the faculty collected the notes, they had a much bigger goal than just saving on copying costs.

"We wanted to change the paradigm through which we taught operations, especially in the core class," explains Chopra, the IBM Distinguished Professor of Operations Management and the school's senior associate dean for curriculum and teaching.

Most supply chain texts "were just a collection of topics, rather than a compelling framework for understanding the subject," Chopra says.

"We asked ourselves: 'What is the underlying framework for understanding and teaching operations?' We realized it was the concept of flow, from cars flowing through an auto plant to patients flowing through hospitals or diners flowing through restaurants. Any operation can be understood through the concept of flow."

The faculty found that the paradigm resonated with Kellogg students at both the MBA and executive levels — and with the field at large. "We were very pleasantly surprised to see the book become such a success," Chopra says.

In addition to Chopra and Van Mieghem, the book's co-authors included MMM Co-Director Sudhakar D. Deshmukh, currently the Charles E. Morrison Professor of Decision Sciences, and former Kellogg professors Raví Anupindi and Eitan Zemel.

Five questions to consider about supply chain management

1. How well is the supply chain's structure aligned with the firm's strategy?

2. What are the risks the supply chain faces, and what mitigation strategies have been put into place?

3. When is it more efficient to create a global supply chain…and when is it better to keep things local?

On the bookshelf alongside that text is another work authored by Chopra: Supply Chain Management: Strategy, Planning, and Operation, named the best book of 2001 by the Institute of Industrial Engineers. And next to that is Operations Strategy: Principles and Practice, by Van Mieghem, the Harold L. Stuart Distinguished Professor of Managerial Economics. This new volume presents the first research-based framework for operations strategy and explains how to tailor the operational system for maximum value and competitive advantage.

These books join an impressive array of publications by Kellogg School faculty on the most pressing operations and supply chain concerns today. Matters of risk and uncertainty in a globalized economy are at the forefront of managers' minds, and Chopra and his colleagues are addressing precisely those issues.

"How do you structure supply chains so they are well-equipped to deal with uncertainty?" Chopra says. "How do you put together complementary strengths that are available around the globe?"

Chopra's recent work has focused on evaluating supply chain risk and determining the benefits of centralized versus decentralized systems. His research examines the risks of disruption in the supply chain and the relative importance of estimating risk correctly.

"Should you be overly cautious, or less so?" Chopra asks. "Mitigation strategies depend on your ability to estimate risk, and it can be very hard to do that accurately. What we've found is that it can, in fact, be preferable to overestimate risk."

Van Mieghem, meanwhile, studies strategic issues as well as tactical execution. Several years ago, he and Chopra proposed a structure for answering the question of whether a manufacturer should sell its goods through a centralized or decentralized system. In a follow-up paper published in 2006, the two argued that Dell Inc. would soon have to start selling its products through retail stores — a decision the famously centralized company reached a year later.

Another paper by Van Mieghem and Kellogg Professor Martin Lariviere developed a model that explored when delay-sensitive customers should plan to arrive at a company for service.

"We offered a more realistic model of customer behavior," says Van Mieghem. "The standard assumption has been that customers decide independently of each other when to arrive to a store or service facility. In reality, customers act strategically and try to anticipate when other customers will arrive.

"We showed that when many customers decide strategically, their aggregate equilibrium arrival process converges to a Poisson process. In other words, the celebrated stochastic process in probability theory continues to apply even with strategic decision making."

The article resulting from Van Mieghem and Lariviere's research was named the best paper of 2007 by MSOM, the flagship journal on operations management.

For his part, Lariviere has focused on applying economic analysis to operations management problems. Much of his work has dealt with supply chain contracting, examining how contract terms can improve supply chain performance. He also has studied how the behavior of self-interested customers impacts service operations.

"The operations group at Kellogg is unique, in part because we are placed within a department that's dominated by economists — the Managerial Economics and Decision Sciences Department," Lariviere notes. "We have much more of an economics focus and it's become very natural to study things like supply chain contracts and customer services. That's been a big part of the work I've done here and what a lot of other faculty members have done as well."

They are supported by the school's Center for Operations and Supply Chain Management, which coordinates research efforts, seminars, workshops and teaching on supply chain issues.

"Over the last 10 to 15 years, we've built a top-notch supply chain program and faculty," Van Mieghem says. "We're seeing an expansion of our group and an increase in our activities, and we span more fields — from traditional supply chain research to services and healthcare. This is an exciting time for us, and we're continuing to improve the Kellogg School's visibility in operations and supply chain management worldwide."